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Congratulatory Remarks by Mr Danial Mah Abdullah, Director-General of Labuan FSA at The Grand Opening of China Construction Bank Corporation, Labuan Branch

Speeches

THE GRAND OPENING OF CHINA CONTRUCTION BANK CORPORATION,
LABUAN BRANCH  

Speech by

Mr Danial Mah Abdullah
Director-General, Labuan FSA

25th October 2019
Convention Hall, Financial Park

YB. Dr. Lee Boon Chye, Deputy Minister of Health,
YB. Datuk Rozman Bin Hj Isli, Member of Parliament Labuan,
YB. Tuan Tan Kok Wai, Special Envoy of Malaysia to People Republic of China,
Mr. Ji Zhihong, Executive Vice President, China Construction Bank Corporation,
YB. Tuan Chan Foong Hin, Member of Parliament Kota Kinabalu,
YBhg. Dato' Sri Haji Amir bin Haji Hussien, Chairman of Labuan Corporation,
Tan Sri, Puan Sri, Datuk, Datin, Distinguished Guests.

A very good afternoon everyone.

1. I am delighted to be here to celebrate the grand opening of the China Construction Bank Corporation Labuan Branch (CCBL), the first first Digital Bank in Labuan IBFC as well as in the country. Our heartiest congratulations to CCBL. Indeed, it is a major milestone for Labuan IBFC to have CCBL, the second largest bank in the world to have its Labuan office as operations hub for the region.

2. The grand opening today represents the ambition of CCBL to expand CCB’s business in South East Asia by offering innovative banking services to customers in this region and supporting China’s Belt and Road Initiative (BRI). CCBL also aims to make Labuan as its regional asset building hub, and an official renminbi settlement bank to serve the Labuan financial institutions.

3. The establishment of CCBL in Labuan is a testament to the Labuan IBFC’s reputation as a preferred jurisdiction for top global players. Its presence together with our existing Labuan top notch banks and other financial institutions in the island would definitely generate more economic spill overs, and continue to contribute towards the island economy. The presence of more than 1,000 people in this hall is an example of this contribution. I was told all flights in and out of Labuan are full for these two days, the hotels and shops owners are smiling and we certainly encourage more of this kind of vibrancy in Labuan going forward. I was also informed that there are more than 200 potential clients of various nationalities with us here today to explore what Labuan IBFC can offer. Indeed, this is an excellent indicator that prospects and investors continue to show great interest and have great confidence on the Centre.

Ladies and Gentlemen,

4. The growth of Chinese financial market in the Asia Pacific region is the most rapid in the last decade. In fact, the Chinese banking industry has surpassed the rest of the world in terms of size, as the world’s four largest banks in 2019 hail from China . By end-2018, China now has over 4,500 banking financial institutions including big state-owned com¬mer¬cial banks, private banks, rural com¬mer¬cial banks and many more. Financial and statistical data from the China Banking and Insurance Regulatory Commission (CBIRC) in¬di¬cate and suggest that the outreach of Chinese banks in the region would continue to strengthen in the future. Talking of CBIRC, Labuan FSA has signed a MoU with them, to foster greater co-operation and collaboration in regulatory and supervisory areas. We hope that the MoU would set the stage for more Chinese financial services providers to establish in Labuan.

Ladies and Gentlemen,

5. Labuan IBFC is home to more than 6,000 active entities which includes top-ranked financial institutions comprising 57 conventional banking institutions. We also have three Islamic full-fledged banks, two Islamic investment banks and 13 Islamic windows. Labuan IBFC entities now employ more than 6,000 people, making the IBFC the largest employer compared to other industries in the island. In fact, there will be more employment to come as the Labuan entities comply with the new substance requirements this and next year.

6. For the banking industry, as at June 2019, the outstanding financing of Labuan banks was USD30.3 billion, with total assets of USD54.7 billion. Total deposits increased by 23.4% to USD10 billion. For first six months this year, the industry has already recorded a profit before tax of USD316.9 million. We expect the banks to have ‘record’ profits again. CCBL has certainly come in the right time. And despite undergoing many challenges, the Labuan banks have remained sound and resilient with strong financial footing, complemented by steady level of earnings, positive liquidity and sufficient capital backing.

7. To chart the way forward, one of the strategic thrusts by Labuan FSA for the future is to focus on enhancing the banking sector. Further, the prevailing trend in the banking industry is the shift to digital, such as mobile and online banking. Today's demand for convenience and speed has led to the transformation of many banking institutions and influx of new non-banking entities offering digital financial services. The financial digitalisation will continue to accelerate, not just with the banks but across other financial sectors in Labuan IBFC. We, at Labuan FSA encourages these innovations as they are impetus for breaking the traditional banking boundaries. The market must evolve in tandem with digitisation to reap the advantages that it offers. With good business models, certainly the sky is the limit for Labuan banks to take advantage on. With CCBL as the pioneer digital bank in Labuan, we hope for the bank to work with Labuan FSA in modernising the Labuan banking space by bringing more technovation to the Centre.

Ladies and Gentlemen,

8. As Labuan IBFC is strategically positioned in the centre of Asia, Labuan FSA remains committed to further enhance the Labuan IBFC’s role in bridging the economies of the region. This is also consistent with Malaysia’s initiative to attract more investments particularly from China into the country, and these can be done via Labuan IBFC. Labuan FSA has a China market strategy, and we will work closely with China’s financial institutions and intermediary firms to pave the way for more Chinese-based entities to be based and conduct business in the Centre.

9. In fact, over the past nine months, we had witnessed a 114% growth of new investors from China, reflecting a significant spike in Chinese business in Labuan IBFC. In terms of financing, a total of USD1.28 billion or about 5% of the total Labuan banking financing has been granted to the Chinese market. With CCBL in the industry, we hope this will bring in more Chinese investors and institutions to use Labuan IBFC as a platform for trade and investments in the region. Even for the BRI, a key success factor for this huge initiative is financing. As such, CCBL could position itself to become the apex financing hub for the BRI. Closer to home, we hope CCBL can even help to finance the construction of the Labuan-Menumbok bridge, to realise the dreams of many in this hall, including yours truly here.

Ladies and Gentlemen,

10. 2019 has been a very eventful year. It is a watershed year considering the significant changes that have been implemented in the year, particularly the new tax framework. And as we enter into the 30th year of Labuan as an IBFC next year, we need to be agile and adaptive to the international regulatory changes, global competition and technological advancements. We are fortunate to be in the fastest growing region in the world – Asia Pacific, allowing us to grow in tandem with the region. However, for the centre to continue to grow and thrive, we need all the support from our stakeholders, especially from our industry players. Labuan FSA will continue to have regular dialogues and interactions with the industry to discuss on matters that affect the Centre including what else could be done to further propel Labuan IBFC in the international arena and initiatives to accelerate its development pace. This includes attracting and facilitating the establishments of innovative banking institutions and financial services especially in the digital banking space to Labuan.

11. The future of the banking industry in Labuan IBFC certainly looks very promising. In line with the aspiration of the Labuan FSA to develop Labuan IBFC into a premier business and financial centre within the region, Labuan FSA will continue with its market-driven approach and work closely with industry players to promote Labuan to international investors on the wide opportunities available in Labuan IBFC. I am delighted that CCBL recognises the potentials of Labuan IBFC, and is maximising the opportunity by setting up their business here. In fact, besides granting approval for CCBL to conduct digital banking business, we have also approved five marketing offices for CCBL to operate from other cities within Malaysia. With this, we hope that it will generate more business activities, more employment opportunities and transfer of skillsets for Labuan and Malaysia.

12. On this note, let me once again congratulate CCBL on its auspicious opening, and we wish all the best wishes to CCBL for a very successful banking business journey in Labuan IBFC for many years ahead.

Mr Danial Mah Abdullah
Director-General, Labuan FSA
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